The BJP?s prime ministerial candidate LK Advani is getting more attention as the Congress-led government looks unsure in power and election talk gets louder. Advani should use this to lay out a few core ideas. Is one of those ideas that the BJP will use the test of ?national interest? while evaluating acquisitions of Indian companies by foreigners? The BJP leader said at an event organised by the Business Standard, with Daiichi?s acquisition of Ranbaxy fresh in memory, that while globalisation is not unwelcome, national interests can?t be overridden and the ?third dimension? has to be kept in mind. This is the kind of elegant caveat politicians love but which can be confusing for policymaking. What is national interest in this context? The ?pride? that comes from Indian ownership of a corporate blue chip? Then India has to answer why it celebrates its acquisition of foreign corporate blue chips. Is national interest defined by strategic concerns that may arise in some cases? That seems a slightly better argument. Even Americans have blocked proposed foreign acquisitions?by a Chinese oil company and by the Dubai Ports Authority. But those decisions have looked paranoid. Paranoia has to be guarded against when talking strategic concerns.
The third, and the least offensive, application of national interest is judging market power. Advani said that mergers/acquisitions shouldn?t create monopolies. That is unexceptionable. But competition authorities, not politicians, should judge that. In rich market economies competition authorities are sole arbiters of the market distorting potential of corporate marriages. India has a Competition Commission de jure. But de facto, the commission is as yet not functioning. A serious politician like Advani should concentrate his argument on corporate deals through that policy prism. Anything else sends out, as we observed, confusing signals. And when India is emerging as a big player in cross-border corporate deals, any suggestion that it is getting ready officially to double talk on mergers and acquisitions will be against the country?s economic interests. The Ranbaxy-Daiichi deal was met with a pleasant silence from the political class. It was a nice contrast from the India of the mid-1990s when politicians worked against BAT?s plans to increase shareholding in ITC. Advani has sort of broken the silence. We will have to see what he, and his party, mean by that.
